Private loan – how the contract should look like

As shown by various types of statistics, we more and more often borrow money from private individuals. Sometimes they are members of our family, sometimes our friends, but more and more often completely foreign to us. Private loans, they treat as an investment that is supposed to bring them a certain profit. However, regardless of whether we borrow money from people we know or not, we should draw up and sign a loan agreement. Thanks to her, there will be no problems in the future with resolving any disputes, of course if they happened. Let’s see what each loan agreement should be.

How the contract should look like

How the contract should look like

Each contract we sign, and therefore a loan agreement, must clearly specify the parties to the contract, so in this case, the data must be contained in the borrower and the lender. The most important data include name, surname, address. Often, the contract also includes a PESEL number and ID card number. In this way, both parties can be identified in a precise manner.

Another important element of the loan agreement is its description. So it has to find in it the amount we borrow and the time after which we must return the money. It should be clearly defined, so it is best in the contract to provide a specific repayment date. We can not forget that the loan agreement should include all costs related to it. Of course, the lender may not charge any fees for the loan, but this should also be included in the contract. All costs should be described separately, so a possible commission, preparation fee, interest costs, insurance costs, etc. should be specified. Equally important, these costs should also be summed up and given as the total cost of the loan. Do not forget about the total repayment amount, which includes the loan along with all its costs.

An important matter that we can not forget when preparing a loan agreement is to determine the detailed repayment terms. We must state whether it will be repaid in installments (if so, in what amount and on what dates) or once. We also have to state if the refund will be made to the account (in this case, please enter the bank account number), or whether the money will be returned “on hand”. If the loan is to be returned in another way, it should also be specified in the contract.

The obligatory point of the contract is also the form of securing the debt. The collateral must be clearly described and there should be situations in which the lender will be able to use collateral. This is a delay in repayment or a lack of repayment. Therefore, it should be clearly stated in the contract how the money will be enforced and what are the costs associated with it (overdue interest, costs of warnings, etc.).

Each loan agreement should also clearly specify what in the case of early repayment of debt and determine whether it is possible to extend the debt repayment period. It should be recorded in it, whether there will be any charges for this reason, whether interest will be reduced, etc.

According to the applicable provisions, each borrower has the option to withdraw from the contract within 14 days of its conclusion. The terms of this withdrawal should be clearly defined in the contract.

The last point of each contract should be signatures, made by both parties to the contract, i.e. by the lender and the borrower. Only when they are deposited on the document, the contract takes legal effect.

There is not one specific loan agreement template. We can find them a lot on the internet, we can also prepare such a contract by ourselves. We can check its content with a lawyer who will suggest what we should change in it, what to add to it, so that it meets all the standards that apply in our country.

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